My mistakes with the stock market

[Chaitanya_Tanti]

Inactivity is what bugs me during my whole strategy. I pick fundamentally sound stocks so that even if they don’t rally, I don’t end up with duds in my portfolio. But it is bear waiting for bargain scenario where after I sell something, I don’t have anything to buy and the share I sold keeps rallying and I end up with underutilized cash on hand.

[srikanthg]

My mistakes://
Investing in 8kmiles for mere diversification when I was already holding landt infotech at Rs.700
Taking huge allocation in a real estate company which is Sobha bought at price to book value of nearly 3.
Selling large caps and investing in small and mid caps at the inflection point for nifty.
Not holding on to winners Bata India, D-Mart,Berger paints (bought at rs 280) and booking minor profits.
I have learned lot of lessons in market and valuepckr has been a master guide for understanding investing and avoiding major meltdowns.

[vivekvan]

Exactly same problem cannot seem to buy all those stocks which ‘experts’ advise.

[1957]

I keep doing a mistake quite often…
Once I decide to buy a stock with strong fundamentals , I tend to buy the stock at any price prevailing at that point of time due to FOMO factor…
Later the sock corrects by 5-10%… then I repent…though I hold it for long term , returns are limited…

And same thing true while selling a stock when I decide to sell due to weak fundamentals as per my analysis at that point of time … I tend to sell even if I have to book a minor loss…and After selling the stock, it moves up by 5-10% …

[tejasc]

What a story! Thanks for sharing. Your openness in accepting the mistakes itself is showing up your humility and experience acquired. In the end tuition fees paid to market never goes wasted when one has learned the lessons.

[Malkd]

Cheers for the post @gurjota. I currently have an irrational love for idfc first bank and your post made me take pause. It takes up a huge portion of my portfolio and even though I trust the management and the vision this covid era could really make even the best financial businesses risky and could make the upcoming ones even riskier. I think I need to trim my position a bit even though I have full conviction in the stock long term and just add in SIP form every quarter based on results to be safe. Cheers. And thanks again

[Deven]

Good Forum, it’s give support that we are not alone in making mistakes.

In past, I was much clear not to participate in market directly without knowledge. That seems good decision. But But… Instead I gave money to AB Capital and Motilal Oswal and invested in their PMS in 2016-17 and 2017-18.
Closed ABC with 4% yoy gain; MO still ON with 16% loss till date. Will close MO in coming couple of months. Both of them even failed to give at par index return.

PMS concept is out dated and expensive. They just do blanket investment on day we give money in same stocks they invested since long. There is no creativity nor any logical thinking in their investments.

My intention is to write this post is to save others from making same mistake I did.

[Deven]

Yes Jaisish. As per me ETF is good even now. I prefer current ETF that’s based on sensex and nifty 50 (Vs larger one).
Index mutual fund with similar cost structure is better than ETF - as with MF one is not tempted to sale daily basis.
This is my view; do check with expert please.

[Sun_Light_17]

True
I prefer index MFS over ETFs - I used to purchase etfs earlier but that urge to sale was always there which is not with mf

[Sun_Light_17]

Everybody does the same in the beginning
My list of selling the winner just goes on

One thing I have learned is to hold the winners with stop loss

[ameydesai]

I have also posted this in another thread which was meant for Ujaas Energy

Ujaas Energy

I review my portfolio investments once every year

my investment in Ujaas Energy has been reduced to 18% of its invested value (82% value destruction till date)

honestly no money to be made, even by booking loss and selling off

so i am now showcasing the company metrics to keep new investors away from this stock

1. Sales have decreased from 526 Crores (2014) to 51 Crores (2020)
2. The debtor days of this company have deteriorated from 88days (2011) to 716days (2020)
3. Inventory turnover has deteriorated from 12.3 (2014) to 0.56 (2020)
4. FII/DII investment in this company - Almost zero for last 5years - Only promoters hold 60.5% and Public holds 39.5%
5. Company hasn’t paid any dividend after Mar 2017
6. The EPS has slipped from 1.84 in 2014 to -0.67

[Mani_Starter]

Thank you all for sharing your experience.This thread to be must read for newbies like me. I have read this thread almost 5 times. Now i stopped reading news in moneycontrol and stopped watching cnbc 18.

During march crash, my bank asked me to invest in PMS(Motilal). luckily i did not invest.

[vibhor_vaish]

@hitesh2710

Sir I have been following your thoughts for quite a while and wanted your views on this theory as you are also a seasoned investor . I have entered the stock market barely three months back and have invested 80%-90% savings in equities (mostly large cap, I am in my mid 20’s ). Should I hold out for the next further months to bring normalcy to my savings or continue my current strategy of jumping in a stock ( after a lot of research and fair technical valuations only along with its sustainability in the long run). I am confused his experience does throw a caution light .

[hitesh2710]

@vibhor_vaish

Invest only that much amount of money which you do not need for next 2-3 years.

Since you are very young (in mid 20s as you mentioned) you have a long innings of compounding ahead. Try to learn the ropes of investing, do real investing (upto comfort levels as a percentage of networth) and get a real feel of an investor. As you gain more knowledge and confidence and once that is reflected in your returns, increase allocation to equity.

If you are so inclined, try to learn small and mid cap investing too, because if you get the knack of it, there can be huge returns.

Read all Lynch books, zebra in a lion country by Ralph vanger, and other such books and try to digest and internalize the knowledge.

[paresh.sarjani1]

@hitesh2710
Sir would you mind sharing your biggest mistake and learning in your investing career

[Investor_No_1]

Some of the mistakes that I can think of, which cost me significantly in terms of losses and/or opportunity costs are -

1. Invested in a Conglomerate/Holding company for only a sub/part of a business that I liked.
2. Impatience when buying, buying right stocks but too early when I am aware I would get better opportunity later.
3. Investing in a business for the liking of a single man/promoter, his/her aura or past history.
4. Investing in risky sector with no clear exit strategy - Erosion of otherwise excellent CAGR.
5. Not investing boldly/more in some of the high conviction stocks.
6. I am not sure about this last one as I have never tried it so dont know how I would have fared, but feel should have given a try - Not having tried momentum, short/medium term trading strategy in bull markets. It is dificult for me to wear two Hats - of a momentum as well as coffee can investor. Would be great if some senior can guide how they wear this two Hats and achieve success as I feel for above average returns, this skill is most important to execute successfully.

[Investor_No_1]

@nagesh_reddy

This way quality is ensured to certain extent and due to conviction developed by close monitoring, the position size is also can be increased. I generally invest about 90% of my fund in about 10 stocks and 10 % in another 10 stocks. The weightage keeps changing mostly in tail stocks based on stock specific developments. The top position stocks reach that position due to their performance in the market and the increase in conviction on those stocks. I do not know whether the method is advisable. The results in this method may depend on individual temperament relating to carrying the profitable position, cutting the losses on wrong entries and the close monitoring of watchlist. The method is working fine for me.

Thanks for sharing, let me elaborate on my problem and exactly what I meant by wearing two Hats. Taking example of say the present crash in march, I had limited cash and limited brain bandwidth to either focus the resources on the sectors and stocks which can prove to be a part of my coffee can with time i.e. on lookout of such stories and buying them cheap/reasonable valuation/dips or focusing resources on sector tailwinds and catch the momentum for 6-12 months or so…I am unable to focus on both and divide resources be it the thought process or the spare cash…whatever extra time I have I end up studying on lookout for the next coffee can pick and whatever spare cash I have end up finally going to such picks only…end result is I tend to loose on momentum plays, which I would have otherwise enjoyed the ride, had not for this limitation of my psyche?

Would be great to know if anyone else also face such problem/limitation and want to overcome it and if they have already, then How? I am aware that most anwers I get is say divide portfolio into 90/10 or 80/20, divide the cash, satellite/core etc… I am aware of all that concept and strategy but problem is something stops me from practicing it, I am unable to make myself look beyond the coffee can approach, even if I want to…Thanks

[Investor_No_1]

@IcyHot

I will only restrict myself to Indian IT story, which is the only place where management has historically been ethical.

Thanks for sharing your story in details. Above statement again looks risky to me. No doubt IT has best talent of India at moment but any sector would have inherent risks. I see least business risk in India in quality FMCG but they still have valuation risk. Being IT heavy maybe fine but not sure about buying only IT?

[akash_das]

I had the opposite problem of running into momentum stocks and sectors when I started investing. The company would give good performance and stock would rise sharply. The short term gain would dissappear quickly when the company could not sustain its growth.
To overcome this I started to invest in sectors with permanent tailwind like Consumer staples, Information technology, Capital markets, Consumer durables etc and avoid Cyclicals completely.
For momentum play, instead of going after the hot stock, I would wait for a company in my portfolio to gain momentum. Then increase its allocation in the portfolio.

[zygo23554]

The narrative in this thread seems to be - I screwed up in the past for so and so reasons, now I am wiser. Good in a way but has the potential to mislead.

Reason - There are so many mistakes that one can make, it will take a few lifetimes to make all of them! Investors (unless one is really good) tend to hop from one mistake to another, rarely does it so happen that people make all their mistakes in 5 years and there on become good investors.

The best fund managers continue to make mistakes even after two decades of managing money, what special skills does the average investor have when it comes to avoiding mistakes? Mistakes will always be made, no doubt about that.

Instead redefine the objectives -

How can we minimize the impact of mistakes that we will end up making?
How do we ensure that our mistakes do not set us back by too much?
How do we ensure that we always live to fight another day?

Now we are thinking about portfolio construct, risk management, limits, position sizing and how to build up/down allocation to any stock.

The biggest critique I would make (If I had to make one) about most people on this forum is our inability to think as portfolio managers. We think stock picking is all there is to investing.

Stock picking and portfolio management are different skills, eventual outcomes at the portfolio level depend as much on the latter as they do on the former.

We need to build those skills too. Excessive focus on discovering the next good stock won’t help us when the next market correction hits. Focus on surviving crisis is as important as the focus on generating alpha. If you are down 4 wickets for 50 runs while chasing 275 in a knock out game, irrespective of how well the team bats from there the fate is more or less sealed 90% of the time.